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?Sales for online retail businesses are booming, and more consumers than ever are looking towards the Internet to search for and buy products online. One of the techniques that many online retail businesses use is drop shipping, a system of buying and shipping products which is typically negotiated by you--the online retailer--and manufacturers or wholesalers. In fact, an increasing number of manufacturers and direct wholesalers are starting to provide drop shipping services to retail clients alongside traditional bulk wholesale product pricing. For everyone involved--the retailer, manufacturer or wholesaler, and the consumer--drop shipping has many advantages over the many other shipping options offered by online retailers. What is Drop Shipping? A drop shipping agreement between you and your supplier is an agreement that states that the supplier will ship the products sold by the online retailer. The way this process works is pretty simple. The online retailer sells a product, sends the order to the supplier, and the supplier ships the product to the consumer who purchased it. In addition, the retailer only pays for the products once they are sold to customers--not before. Advantages of Drop Shipping One clear advantage that online retailers have when it comes to using drop shipping services provided by a product supplier is that physical products do not have to be stored--at least not at the retailers' expense. Instead, drop shipped products are stored on shelves at the supplier's warehouse or other storage unit. Since the supplier stores the products, this means that online retailers do not have to find or pay for a physical location to store the products they're advertising and selling. In addition, online retailers don't have to waste time at the post office shipping products or paying for an expediter to come pick them up. For small businesses that maintain online shops, these translate into huge cost savings in terms of business expenses. Minimizes Risk Another benefit of using drop shipping services is that the online retailer doesn't have to worry if product inventory doesn't sell. Traditional bulk wholesale retailing businesses buy the products first before selling them. In other words, they pay upfront. With a drop shipping service or business, however, you don't pay up front for the products sold to your customers. Instead, you pay for the products out of the retail purchase price paid by your customers. This means that you lose nothing if the products do not sell as well as you had hoped or your online retail store just doesn't take off for one reason or another. In addition, it also means that you're able to sell a lower quantity of the products you're offering since drop shipping service providers do not typically require a minimum "purchase" amount since orders are filled as they roll in. One of the few downsides to using drop shipping services for your online retail business is that not every wholesaler or manufacturer offers these types of shipping services, which makes it difficult to offer the exact products you want in your online store. In addition, some drop shippers may charge minimal fees for their drop shipping services. However, considering the numerous advantages for the online retailer, any downsides to drop shipping services are outweighed by the potential cost savings that this type of agreement with a manufacturer or wholesaler provides. In short, drop shipping minimizes risk for your business, prevents loss, and gives you a newer, more efficient way of getting things done. ------ Jake Sabey is an Education Specialist at Doba, whose proprietary software works with drop shipping wholesalers to provide universal access to over 1.4 million products to retailers from hundreds of wholesale suppliers.
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